IrokoTv, a leading video streaming service for African movies, has announced that it is cutting back on its African growth and investment to focus on Europe and North Africa where it has a higher Average Revenue Per User (ARPU).
Jason Njoku, the founder of IrokoTv made this announcement in a post on his website titled “Resizing IROKO.”
Njoku in his post gave a vivid insight into IrokoTv’s plan for 2020 which was to “grow member base to ~500,000 whilst in parallel, improving our Africa annual ARPU from ~$7-8 to $20-25 with additional services and features.”
Some of the strategies taken to achieve these objectives according to Njoku include adding international content and introducing celebrity shoutouts. From January to April, IrokoTv had a smooth ride despite the COVID-19.
“At first, this was a massive boom, our international subs daily additions grew 200% as people were locked in and forced to stay at home. In West Africa, people treated it as an extended holiday so even though we moved fast to pre-empt problems (the first company to implement a 100% work from home policy and 47% furlough and cutting salaries of the teams).”
But as the impact of the COVID-19 pandemic began to bite, IrokoTv took a hit.
“April was our best month ever, then the aftershock of global economic collapse started to squeeze West Africa. Consumer confidence started ebbing, then completely collapsed. We spoke to thousands of our customers to understand what was happening.
“People were fearful, people were losing jobs. Entertainment is important, food is essential. With kids at home (they are weapons of mass food destruction) and salaries being adjusted downwards or outright disappearing, we saw a linear path of reductions in subs. April to July we dropped 70%. Our agents’ productivity, which we have spent the last 18 months grinding out to all-time highs, just stopped too.”
Beyond COVID-19, Njoku stressed that the decision to cut its African investment was further fueled by the new round of devaluation of the naira (IrokoTV mostly does business in $) and the introduction the 6th Amendment to the NBC code.
Njoku says: “This singular, inexplicable act (new NBC code) destroys PayTV in Nigeria. Let me be clear, this had a massive impact on the decision to discontinue investing (and losing money in Nigeria).”
With an operating loss of $30m+, combined with the COVID-19 fallout, rapidly devaluing currency and hostile regulatory environment, Njoku says “It’s time to pause the burn. It’s time to hunker down and see what the next 18 months bring.”
He adds: “Over the next week, IROKO will be defocusing our Africa growth efforts and we will revert to focusing on higher ARPU customers in North America and Western Europe. Even after pushing incredibly hard in Africa for the last 5 years, our international business represents 80% of our revenue today, so by taking out Africa growth-related costs, we cut our $300k/month burn to <$50k/month.
“Still high, but once things normalise we should have a clear path to free cash flow + profits in 2021. This will unfortunately lead to a pretty dramatic change in the size of our Africa teams. There will be around 150 job losses.
“We are still working on the numbers, and in order to soften the blow, we are speaking with a number of companies who have taken an interest in our highly trained telesales agents.”
